TEXT-S&P raises County of Oxford, Ontario to 'AA'

Tue Nov 27, 2012 3:49pm EST

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Overview
     -- In our view, the County of Oxford has a long history of superior 
operating surpluses, strong liquidity position, and moderate debt burden.
     -- We are raising our long-term issuer credit and senior unsecured debt 
ratings on the County of Oxford to 'AA' from 'AA-'.
     -- The stable outlook reflects Standard & Poor's expectations that within 
the two-year outlook horizon, Oxford's operating performance and liquidity 
position will remain strong, and its tax-supported debt will not materially 
surpass 50% of its adjusted operating revenue.

Rating Action
On Nov. 27, 2012, Standard & Poor's Ratings Services raised its long-term 
issuer credit and senior unsecured debt ratings on the County of Oxford, in 
the Province of Ontario (AA-/Negative/A-1+), to 'AA' from 'AA-'. The outlook 
is stable.

Rationale
The ratings on Oxford reflect Standard & Poor's view of the county's long 
history of superior operating surpluses, strong liquidity position, and 
moderate debt burden. We believe that the county's significant after-capital 
deficits and a relatively concentrated economy constrain the ratings.

Oxford's operating performance remains superior, in our opinion. In 2011, the 
county posted a 19% operating surplus of adjusted revenues, in line with the 
10-year average and significantly above that of its peers. This has allowed 
the county, in the past decade, to use its reserves to finance a substantial 
portion of the capital spending, while maintaining a moderate debt burden.

Oxford benefits from a strong liquidity position and we expect it to remain 
robust to meet debt servicing and contingent liabilities throughout our rating 
horizon. At the end of 2011, the county's estimated free cash and liquid 
assets (Standard & Poor's-calculated) were C$75.5 million or about 870% of 
estimated debt service in 2012. Oxford also has access to an undrawn credit 
facility of C$10 million. Of note, the county has maintained net creditor 
status for the last 10 years.

We believe that the county's debt burden remains moderate. Oxford's 
tax-supported debt was about 48% of consolidated operating revenues in 2011 
and its interest-to-adjusted operating revenues ratio was 2.7%. The county 
issued C$12.1 million in 2011 to finance about 25% of its capital spending. In 
2012, it issued only C$0.34 million, compared with C$9.5 million budgeted, due 
to lower-than-budgeted capital expenditures. Oxford plans to issue about C$8.8 
million in 2013 to support its capital spending, and plans none in 2014. As a 
result, we expect its tax-supported debt burden will not vary significantly 
from the current level and will not materially exceed 50% of consolidated 
operating revenues in the next two years.

Higher capital expenditures and lower stimulus funds led to negative 
after-capital balances over the past three years; Oxford's after-capital 
deficit was 11% in 2011. We estimate that, in our two-year outlook horizon, 
Oxford's after-capital balances will improve, as its operating surpluses 
should remain in line with the historical average and the county expects to 
lower its capital spending.

In our view, Oxford's economy is somewhat concentrated, relying largely on 
auto manufacturing. The county's largest employers, Toyota and CAMI (a joint 
venture between Suzuki Motor Corp. and General Motors Co.), increased capacity 
and added new shifts in the past two years. Nevertheless, new companies are 
locating in Oxford. Siemens has recently opened a wind turbine blade 
manufacturing facility. As well, the county expects Sysco (North American 
marketer and distributor of food services), and Execulink Telecom (provider of 
high speed Internet and phone services) to start their operations in Woodstock 
in 2013. In addition to adding about 700 jobs to the economy and largely 
offsetting jobs losses from business closures, these companies should 
contribute to diversifying Oxford's economy. 

Outlook
The stable outlook reflects Standard & Poor's expectations that within the 
two-year outlook horizon, Oxford's operating performance and liquidity 
position will remain strong, and its tax-supported debt will not materially 
surpass 50% of its adjusted operating revenue. We could revise the outlook to 
positive or raise the rating if there were a material improvement in budgetary 
performance, in particular a return to after-capital surpluses, and the 
economy showed significant signs of robust growth and diversification. 
Conversely, we could revise the outlook to negative or lower the ratings if 
Oxford's tax-supported debt were to increase over 60% of projected operating 
revenues, liquidity and budgetary performance were to weaken considerably, and 
there were a sustained deterioration of the local economy.

Related Criteria And Research
Methodology For Rating International Local And Regional Governments, Sept. 20, 
2010

Ratings List
Upgraded
                                        To                 From
Oxford (County of)
 Issuer Credit Rating                   AA/Stable/--       AA-/Positive/--
 Senior Unsecured                       AA                 AA-



Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at 
www.standardandpoors.com. Use the Ratings search box located in the left 
column.
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